“Enhancement in NDT Inspection for Operational Effectiveness, Efficiency & Excellence” Francisco Garc´ ıa Torres * MSc BSc (Honours) Advanced Mechanical Engineering & MSc Economics NDT PCN Level III, MIntNDT March 23, 2021 Abstract In previous report, “End of the Paradigm of Quality Vs Production with NDT Inspections 4.0”, there was an approach to show a way to help out to align all project stakeholders in the same direction to avoid disruptions & deviations that, nowadays, come from Project’s Quality requirements. It was exposed that Quality should become a management & financial tool that will boost or aid a project in alignment with company’s strategies and immediate targets. To manage it, a small twist in actual Inspection Services shall be introduced. However, it becomes evident that the potential client, although can see and understand the potential improvement, can believe that an added value carries cost increments and, therefore, under dynamic competitive business, performing the change can be, at short term, harmful. In this document, we intend to show that any change shall be linked, not only to improvement, but also to immediate cost reduction so that all management structure can conceive quick implementation as part of its department strategy & enhancement in their budget cost. For that, concepts such as effectiveness, efficiency and excellence must be approached. We will give clear saving cost ways which will follow the terminology. In Financial terms and without a deep analysis, we can confirm cost savings above 30% from current prices are achieved. 1 Introduction Many companies are moving into what is called Industry 4.0. Vast amount of capital resources are in- vested. We do not have any argument against this type of industry, certainly it is the future. It is evident. However, we question whether or not this capital is rationally invested. Many companies, mainly management, have accommodated investments based on what the market is leading on rather than on what the company needs. In the near future, we will read news on companies that will bankrupt because their bet was reckless and they couldn’t pass these investments on to the final consumer. And energy companies, even though they are strong, are not immune to these decisions. * Email: [email protected]1
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The answer is NO ; basically because they only target Quality Engineering. They completely forgot
one main premise: “A project is Economy”. A Board Director, Project Manager, CFO, CEO, Financial
Manager and so on, know that perfectly. There is a budget and a target.
But, what will happen if we target NDT inefficiencies? Can, then, advanced NDT techniques make
up for their costs changing the Quality Inspection to become fully efficient?
The answer is a big Yes. Even more, the overall inspection campaign should cost less than using
conventional techniques, as we will see.
There are several ways to achieve this statement.
Site NDT Inspections : Let’s break down the daily activities of an NDT company:
• Toolbox and scope of work meeting
• Equipment Calibration
• Permit to work
• Data Collection
• Equipment post-calibration tests
• Data analysis
• Reporting
In bold, there are the only activities which are really skilled and, with current technologies, even two
of them can be done by unskilled personnel.
Only data analysis is really skillful. The rest of activities, with proper arrangement, can be done by
basically anyone.
With conventional techniques it is no possible to break down data collection from data analysis. Lack
of Digital Footprint that can be analyzed after data collection forces the NDT inspector to carry out all
unskilled activities as well.
Looking at the different daily tasks we can estimate that, at maximum, only during one third of daily
working time the client is paying the right price. Two-thirds or 66,6% of the total workday is overpriced.
As an example, for a low-skilled worker, a client is expected to be charged per day around £200 or
less. But for a high-skilled worker something above £5003
If we calculate the average daily cost based on the balance of skilled-unskilled work time:
2
3× £200 +
1
3× £500 = £300
For a campaign of 300 days, we can estimate a saving of £60,000 minimum yearly per NDT inspector
working onsite. But, if a manager wants to apply this in the market, he will face that skilled personnel
will not join. The associated costs to become skilled are not aligned with expected salary. And, even
more, this way is not a cost reduction.
3Both prices are an estimation, they are just based only on personnel cost without equipment, living costs, etc.
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Report: Enhancement in NDT Inspection for Operational Effectiveness, Efficiency & Excellence
In many occasions, more than what we should be expecting, cost savings are misunderstood. Com-
petitiveness 4 when not associated to an enhancement in productivity or in efficiency, only creates a con-
jectural price reduction, and the project costs derived from inefficiencies are only transferred to another
stakeholder. It is only a transitional arrangement that never solves the problem. In fact, at short term it
sharpens and creates new inefficiencies. Following this policy looking for improvement is to fool ourselves.
Keeping on with the example:
Let’s say that the project have got 10,000 welds (assume one meter long each weld to simplify the model),
that need to be inspected5. Actual NDT inspector production per day is, including reporting, four welds
and the project last 300 days.
Total welds per day to be inspected:
Welds per day =10, 000
300= 33, 3
If one NDT inspector can test four per day, it implies that the number of inspectors needed would be:
NDT inspectors =33.3
4= 8, 33
If each one costs £500 per day during 300 days, it means that project management should allocate
£1,250,000 to cover NDT activities. Comparing with the goal price of £300 for the same work done, the
price is almost double.
When the client’s intention is to trade low the price, it is eminently flawed and defective when com-
petitiveness is not based on overall efficiencies’ improvement. As per above arguments, skilled personnel
will flow to other areas where, in economic terms, their ROIC activities will be bigger than their WACC6.
Plainly, it is to say that no inspector will invest to improve his education and skills if the return expected
is equal or lower than the capital they have to spend. This argument is also connected with the cost of
opportunity. Although this financial terminology is normally used only in business, everybody makes this
analysis at some extent in many aspects of our lives.
What will be the purpose of anyone to invest a dear amount of money from his own pocket if it will
not be reflected or barely in his future incomes? Or, better said, will anyone invest if the return is so far
in the future than it is difficult to predict the returns due to many uncertainties?
The only reason people invest when the ROIC = WACC is to keep afloat their actual status quo, thus,
they will trade to spend the minimum and only under the certainty that they will keep their status quo.
By trading low the most competent/skilled will leave the market looking for better opportunities
elsewhere. Then, the market will only keep the unskilled who will be unable to perform the inspection
activities, so NDT companies will try to invest to qualify these unskilled personnel but it will be limited.
The ceiling price £300 will force them to invest the minimum to keep their operational margins at a safe
level. This creates a mediocrity culture in the industry.
But the worst is that for the next project, as too many deviations occurred, the client will want
to apply contingencies as lessons learned so they will try to trade even lower. That happens because
they believe that by saving a little bit more in the next project, in case of another deviation, it will be
compensated.
4Low product or services price comparing competitors5Just as an example only6Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC)
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Report: Enhancement in NDT Inspection for Operational Effectiveness, Efficiency & Excellence
Surprinsingly, deviations become bigger.
Mainly, this cost saving strategy is built on a misinterpretation of productivity concept. This concept
is normally defined as a ratio between the output and input volumes. In other words, it measures how
efficiently production inputs, such as labour and capital, are being used in an economy to produce a given
level of output. Productivity is considered a key source of economic & business growth and competitive-
ness. In labour terms, labour productivity can be measured as output per worker, or output per hour
worked, where output is expressed as the ‘monetary value’ of the goods and services produced. It is a
key economic indicator and shows how effectively labour is being used in an economy.
Productivity is normally confused with Cost of Production. In general, productivity is represented as
follows,
Q = K × L
Where Q is the amount of goods or services produced, K capital or fixed resources and L as labour,
referring to the human resources a business uses to produce its good or service.
Labour can be variable, meaning it’s a factor that can be changed by the business (by hiring more
people). The actual formula used to calculate production could be any variety of the following:
Q = KL (Output = Capital times Labor)
Q = K + L (Output = Capital plus Labor)
Once the function is calculated, it can be graphed, and a company can see where inefficiencies are
placed and how much the variables can or should be changed to maximize output in relation to the raw
materials.
The main misconception is to apply that as a general rule. Also a great deficiency is that K is con-
sidered fixed or constant when an analysis of the business or project is done, and it should not.
Whereas Cost of production refers to the total cost incurred by a business/project to produce a spe-
cific quantity of a product or offer a service. Production costs may include things such as labour, raw
materials, or consumable supplies.
When both concepts intermingle lead to misconception, then, the tendency is to try to trade low the
cost by thinking that:
1. Output is always optimal.
2. Lowering all costs works to the benefit of project margins.
3. Understanding decisions under Static rather than Dynamic thinking.
Discussing this topic can be very lengthy and it is not the purpose of this article. However, it is es-
sential to understand that, though related intimately, it is not the same. Surprisingly, people keep falling
onto same mistake so, when looking how to reduce the cost of final output, they immediately believe that
cost of inputs must be lower, when sometimes (most of them) by rearranging how the inputs are used
the productivity can be enhanced, hence, lowering the unit cost. Mainly, it is achieved with a new use in
technology.
And this last statement, yes, it is cost savings!
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Report: Enhancement in NDT Inspection for Operational Effectiveness, Efficiency & Excellence
NDT inspection as part of modern industrial quality system, it really began at the end of 80s. Nowa-
days, it is fully implemented in the industry.
NDT equipment manufacturers have been investing large sums of money to develop better equipment
that can improve a company’s quality system. As an example, conventional ultrasonic from analog sys-
tems moved to digital and, then, they developed the technique to Phased Array Ultrasonic; from Eddy
Currents to ACFM & ECA; from Radiography to Digital Radiography and so on. For every inspection
need, NDT manufacturers have been developing new solutions. Nowadays PAUT systems can be even
controlled remotely.
The added value of equipment has grown exponentially, the quality of their results are constantly
evolving. The speed on data process is aligned with CPU processors’ progression. Their current ceiling
is based on the same restrictions than all computing systems are facing.
All industry is facing a constant change in processes to be competitive in a turbulent market. In
offshore energy industry (known as the most reluctant to change), cost and productivity are becoming
important factors. Number of energy actors have grown exponentially, same than different ways or sources
to obtain energy. This has impacted energy price. Those days where energy cost was secondary due to
huge margins are gone, nowadays to be competitive is aligned with production costs. So, it is normal to
realize why they invest in new technologies to achieve the target.
Introduction of Phased Array Ultrasonic has changed NDT inspection but, where has gone that added
value for the industry?. Looking at it, nowhere. And not because the technology is not advanced and
revolutionary for quality systems, and not because it is more expensive (although nowadays cost of one
advanced unit is very affordable);
If the industry is reticent to implement new technologies is because the NDT inspection organisational
system (“The way they work”) is basically the same that they were using with conventional equipment.
It did not develop at all. The opportunities, that new technologies are (or have been) offering, have been
continuously overlooked.
With conventional techniques there were also inefficiencies, but the cost to tackle them were not jus-
tified as they were inherent to the technology that was used at that time. To implement labour division
was not a solution in economic terms. Nowadays, the technology has surpassed those inefficiencies that
were the ones to be blamed for. In fact, nowadays the highest inefficiency percentage in an inspection
program comes from the human factor.
Technology is so advanced now that its inefficiencies are practically negligible.
The human factor in NDT structure as it is used nowadays is so inefficient that, no matter how much
the price drops, inspection will always be considered expensive. In fact, these inefficiencies hide the full
development in cost savings that new technology can achieve for an inspection program. A company that
wants to be more competitive but it is not sorting out the inefficiencies from that area, has no chance
but cutting salaries, cutting corners, hence, devaluing quality.
Unfortunately, it is because the NDT inspection did not adapt to new technology so they are not
taking advantage of the huge added value that the advanced NDT techniques can accomplish when used
appropriately.
It is frustrating to realize after all manufacturers efforts in development that its added value is con-
stantly underused because NDT inspection services are so inefficient. We can witness many times how a
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Report: Enhancement in NDT Inspection for Operational Effectiveness, Efficiency & Excellence
good manufacturer spends money in exhibitions, webinars, trainings, software, etc., showing the public
that their system can achieve a new step on quality and speed and, however, it is being rejected because
their system is more expensive than a previous and obsolete one, just because inspection inefficiencies
are misplaced. £10,000, £30,000, £50,000 more are just peanuts for a project if the new technology
allows to rearrange other production factors lowering the output cost. What means the cost increment
in equipment if the overall inspection cost, due to rearrangement, is 40% less? If clients know that, they
will undoubtedly enforce everyone to buy the latest technologies.
Unfortunately for manufacturers, their main clients are the ones who have got an inefficient system.
So, their sales tactics cannot work properly.
We should move forward if we really want to improve at all levels. It is time to implement Division
of Labour to NDT activities.
How can we achieve low cost, high inspection productivity and unbeatable quality? And, adding to
all of that, auditable inspection at an insignificant cost?
Basically, removing inspectors from site. Essentially, it is to allocate them where they achieve their
optimal performance, meaning by that, where their value is maximized.
Getting back to our initial example:
We contract unskilled personnel to collect all data on behalf of the NDT inspector, the new technology
advancements make them too simple to do that. Hence, allocated time to collect data has just doubled.
Although it is not exactly like that as data collection will easily be more than double as it is a non linear
function. However, for our purpose, we are going to keep it as linear.
Hence,33, 3 Welds per day
8 per Data Collector= 4, 16 ≈ 5
So,
5 × £200 × 300 days = £300, 000
If initially one inspector could in one third of a total shift time analyze and report four welds, it is
obvious that 12 joints will be affordable. So for 33.3 weldments per day we should contract three inspec-